Letter: Some questioned Nalcor’s numbers from the start

The Telegram

Published: Oct 24, 2017 at 1:25 p.m.

Updated: Oct 25, 2017 at 6 a.m.

Muskrat Falls, on the Churchill River in Labrador.

In his Oct. 21 article, “Things in Newfoundland and Labrador are terrible: Locke,” James McLeod wrote that “(Wade) Locke said his belief in the (Muskrat Falls) project was based in part on demand forecasts that turned out to be incorrect.”

I would submit, however, that demand forecasts did not just turn out to be incorrect.

Instead, I would argue that well before the project was sanctioned, inquiring and open minds would have and should have seen (and it was publicly reported) that demand forecasts were misleading.

As early as June 23, 2011, my Telegram letter “By Nalcor’s own numbers,” questioned Nalcor’s assertion that it was being “conservative” with the demand numbers.

I stated, in part, that:

• In fact, Nalcor’s public documents outlining our historical demand for electricity covers a period of 40 years, from 1970 to 2010. And while it is technically correct to say that historical demand over the last 40 years has, on average, climbed about 2.3 per cent a year, of itself this statistic is misleading, and I would suggest, not very relevant and not very informative.

• Using a 40-year assessment period (and using a 40-year average growth rate) effectively hides the fact that 98 per cent of that historical increase in demand was during the first half of that 40-year period — from 1970 to 1990. So, in order to arrive at that 2.3 average increase in growth rate, Nalcor had to reach way back to 1970.

• Without reaching back 40 years, the numbers tell a whole different story.

• That 20-year period (from 1970 to 1990) was a period when average demand rate increases were very high (I would suspect households were switching off oil and moving to electricity), and it is that early 20-year period from 1970 to 1990 that drives the 40-year average increase up to 2.3 per cent per year.

• Of the 100 per cent of the increase in the demand during that 40-year period, 98 per cent of it can be attributed to the period from 1970 to 1990, and only about two per cent of the increase in demand from the period from 1990 to 2010.

• So, from 1990 to 2010 (the most recent, and I would suggest the most relevant 20-year period) the compound average growth rate in demand has been only about 0.1 per cent per year (23 times lower than Nalcor’s 40-year average rate of 2.3 per cent).

• By 2010 (after the closure of the paper mills) electricity usage in Newfoundland was almost identical to what it was in 1990 — not 2.3 per cent, not 0.2 per cent, but only a 0.1 per cent per year average increase over that 20-year period, a negligible growth rate.

So, was Nalcor really being “conservative” when it forecast an average 0.8 per cent demand increase annually for the next 50 years?

Was this (and other) key forecast questions brought to the public’s’ attention?

And was there reason (as far back as 2011) for Locke to question Nalcor’s demand forecast and to doubt his own beliefs?